Morgan Sindall profit rises 48% as revenue hits £2.8bn

Construction, property and infrastructure group Morgan Sindall has reported a jump in pre-tax profit and revenue in its full-year results as margins more than doubled in its construction business.

The group, which includes fit-out firm Overbury, developer Muse, designer Morgan Lovell, and housebuilder Lovell alongside its construction and infrastructure arm, reported revenue of £2.79bn for the 12 months to 31 December 2017, up from £2.56bn a year earlier.

Pre-tax profit rose to £64.9m, up from £43.9m over the same period.

Profitability was boosted by strong performance in the company’s construction arm, which saw its operating margin rise from 0.7% in 2016 to 1.5% in 2017. Operating profit also more than doubled to £20.4m, on a revenue of £1.39bn.

Profit margin also grew throughout the year, rising from 1.1% in the first half to 1.8% in the second half.

The construction division reported a steady order book at £1.85bn, down slightly from £1.88bn a year earlier. Projects the company secured last year included Manchester Metropolitan University’s £45m Arts & Media building; a place on the Education & Skills Funding Agency’s £8bn framework; and two projects worth £47m at Liverpool’s Paddington Village.

It also works on major projects in Cumbria, having completed a £90m industrial project for BAE Systems in Barrow last year, along with a £39m training facility for the Civil Nuclear Constabulary near Sellafield.

Morgan Sindall’s construction business now wins 93% of its work through negotiated, two-stage, or framework bids, with only 7% won through competitive tenders.

Other divisions, including fit-out, also reported strong results. The fit-out business saw operating profit rise 42% to £39.1m, while revenue rose 16% to £735m.

Housebuilder Lovell’s profit remained stable at £14.1m, up 5% year-on-year, while revenue rose to £474m, up from £433m a year earlier.

Urban regeneration and development arm Muse saw revenue rise to £175m, up 12% year-on-year, but operating profit dipped slightly to £10m, down from £13.4m.

The only division to report a loss was property services, which posted an operating loss of £1.3m, compared with an operating profit of £0.7m a year earlier.

Morgan Sindall blamed the losses on its legacy insurance business and “costs relating to the streamlining of its contract portfolio by existing underperforming contracts”.

Chief executive John Morgan said the group expected to see more margin improvement across the group throughout the year.

“These strong results are evidence of the significant operational progress being made across the group and are a testament to the high quality and commitment of our people,” he said.

“Our positive cash generation and increase in average net cash in the year has further strengthened our balance sheet and provides us with the flexibility to invest in our regeneration activities whilst allowing us to continue being highly selective with bidding in our construction activities.

“We are confident of another good year of progress and with this positive momentum, are well-placed to deliver a result for the year which is slightly above our previous expectations.”

Morgan Sindall’s share price rose 4% this morning and stood at 1,284.72 per share as of 12:45 today, up from 1,254.00 at 08:00 this morning.